DAILY SUMMARY May 6 - 7

[National Dialogue Moderator <moderator>]

Daily Summary May 6-7, 1999

Moderator's Question - "The Big Picture"

Friday, May 7: Bob Rosenblatt noted that the proposals of the President and Representatives Archer and Shaw use anticipated future surpluses to help fund the Social Security program and asks what happens if the surpluses don't materialize. He asked whether it is fair to promise the revenues to a program for retirees when there are also other competing social problems that could use the funds, such as poverty and health problems among children and the lack of health insurance coverage.

• John Rother supported the use of the surpluses for Social Security. He said future Congresses would have to agree to allocate the surpluses to the Social Security program, and people will have an opportunity to share their views on this issue with them. He said poverty and the uninsured are important national problems but they should be addressed independent of the current discussion.

• Sam Beard also supported the uses of the surpluses for Social Security, stating that the current economic climate provides a unique window of opportunity to do so. He said that the use of the surpluses is one of a combination of changes to be made. He said that "necessary cuts to basic defined future Social Security benefits" should not come at the expense of Americans facing a high rate of poverty and have little or no health coverage.

• Gerry Shea also supported the use of the surpluses for Social Security, preferring President Clinton's plan over the Archer-Shaw proposal. The Clinton proposal uses the surpluses for 15 years, while the Archer-Shaw proposal uses the surpluses "for decades into the future." He also noted that the President's plan reduces the national debt and interest payments, laying the groundwork for "larger budget surpluses in the future."

• Ann Combs distinguished between the portion of the surplus attributable to FICA taxes collected in excess of benefits paid and the non-Social Security surplus. The FICA surplus should be used to help fund the Social Security system. The non-Social Security surplus should be allocated to programs with the highest budget priorities, and Social Security should compete with other programs for those funds.

• Ron Gebhardtsbauer noted the general support to use at least a portion of the surpluses for Social Security. "It's easier to fix the roof when the sun is out." He agreed with John Rother that the repayment of the national debt will create the potential for continuing surpluses. He also noted, however, that use of the funds for Social Security means that we can't cut taxes or increase government programs - and that we already face an emergency spending bill for an additional $13 billion for Kosovo. Public comments:

The public had several common questions:

• Several commenters asked how much of the "surpluses" under the Unified Budget are attributable to Social Security taxes and how much are attributable to general revenues. They suggested that most, if not all, of the surplus is attributable to Social Security taxes.

• If the surpluses are attributable to Social Security taxes, do the Clinton and Archer- Shaw proposals actually reduce the national debt or add additional revenues to the Social Security system? Will the use of the Social Security taxes to repay national debt simply result in an equivalent amount of Treasury bills being issued to the Social Security Trust Fund? And aren't the surplus Social Security revenues that are being temporarily borrowed by the Treasury and repaid to the Social Security program already counted by the actuaries in their estimates of when the program will need additional funds?

• How are the annual contributions to the Social Security program calculated under the Clinton and Archer-Shaw proposals? Are they based on a percentage of projected surpluses calculated as of today or as a percentage of actual surpluses when they occur?

• What do the Clinton and Archer-Shaw proposals say about future budget surpluses that fail to materialize? Are contributions nevertheless made to Social Security?

More roundtable comments on "Raising the Retirement Age":

• Gerry Shea said that raising the retirement age is a benefit cut. It cuts guaranteed retirement benefits in a manner that has the harshest impact on workers least able to absorb the loss or to continue working. It means reduced lifetime benefits for all workers and lower monthly amounts for those who begin to receive benefits before reaching the new, higher retirement age. Workers who have physically demanding jobs and relatively less pay will be hit hardest.

• Ron Gebhardtsbauer added that if we raise the retirement age, we need to relax the rules at the oldest ages for qualifying for a disability benefit. He also said raising the retirement age will affect women proportionately less, since, on average, they live longer than men. He also congratulated Sam Beard for listing changes that could reach a 100% fix for Social Security's current financial problems; and suggested that Sam has some other changes for his proposal to use a portion of the payroll taxes to fund individual retirement accounts.

More public comments on "Raising the Retirement Age":

• Public commenters agreed that people will be retiring earlier and that, for many, notions of retirement are changing. One commenter suggested that individual retirement accounts are good, because they provide potential retirees with more flexibility.

• Also more comments about the difficulty of older workers finding and retaining jobs in the face of negative attitudes by employers.

More public comments on "Raising the Wage Base":

• One commenter suggested that, in exchange for raising the wage base, the provisions for investing in IRAs and 401Ks should be liberalized.

• Another noted that the Social Security program is a combination of retirement system, insurance and safety-net. He said the safety-net should be funded by progressive taxes applying to income in addition to wages. The insurance portion should be paid by all potential recipients. The retirement portion should be left to the discretion of the individual.

Ashley Schannauer